5 General Government Revenue

Key Issues

        Total General Government Sector revenue is estimated to be $5 307.8 million in 2015‑16, an increase of $344.1 million above the 2014‑15 Budget estimate of $4 963.7 million.

        Over the Budget and Forward Estimates period, revenue growth is estimated to be an average annual rate of 2.8 per cent (measured from the 2014‑15 Estimated Outcome). This is below the long‑run trend of 4.6 per cent per annum.

        Key components of General Government Sector revenue in 2015‑16 include:

-   GST Revenue is estimated to be $2 246.1 million, an increase of $334.7 million above the 2014‑15 estimate of $1 911.4 million;

-   Australian Government National Partnership Payments are estimated to be $303.5 million, an increase of $50.2 million above the 2014‑15 estimate of $253.3 million;

-   Tasmania's share of revenue from Grants, including GST and Australian Government Grants for Specific Purposes, equates to 65.1 per cent of total General Government sector revenue; and

-   Taxation Revenue is estimated to be $1 027.1 million, an increase of $43.9 million above the 2014‑15 estimate of $983.2 million. There are no new taxes or increases in the rate of taxes associated with this growth in revenue; rather it is primarily a function of economic activity levels and inflation.

        The current Federal Financial Relations environment presents a range of risks to Tasmania's Grant funding over the Forward Estimates.

 

 


Total Revenue

This chapter provides an overview of Revenue for the 2015‑16 Budget and Forward Estimates. Table 5.1 lists the major General Government Sector revenue sources.

Table 5.1: General Government Sector Revenue

 

2014-15)
)

Budget)

2015-16)
)

Budget)

2016-17)
Forward)

Estimate)

2017-18)
Forward)

Estimate)

2018-19)
Forward)

Estimate)

 

$m)

$m)

$m)

$m)

$m)

 

 

 

 

 

 

Grants

3 027.5)

3 453.3)

3 530.4)

3 558.4)

3 736.7)

Taxation

983.2)

1 027.1)

1 041.7)

1 059.1)

1 080.1)

Sales of Goods and Services

354.1)

357.8)

355.1)

362.7)

367.9)

Fines and Regulatory Fees

103.3)

96.1)

97.8)

91.7)

86.6)

Interest Income

15.9)

16.7)

16.4)

19.3)

20.5)

Dividend, Tax and Rate Equivalent Income

342.9)

213.4)

218.7)

255.4)

241.8)

Other Revenue

136.8)

143.4)

140.4)

139.7)

144.0)

 

4 963.7)

5 307.8)

5 400.5)

5 486.3)

5 677.6)

 

 

 

 

 

 

In 2015‑16, Total General Government Sector revenue is forecast to be $344.1 million higher than the 2014‑15 Budget. From the 2014-15 Estimated Outcome to 2018‑19, Total General Government Sector revenue is expected to grow by an average 2.8 per cent per annum which is above the average growth rate from the 2014‑15 Budget, but still below the long‑run trend of 4.6 per cent per annum. Lower than average long‑run growth is mainly the result of an initial reduction in returns from Government businesses, and relatively low growth in Australian Government Grants (excluding GST) and other own-source revenue (including sales of goods and services and fines and regulatory fees).

Chart 5.1 shows the components of Total General Government Sector revenue for 2015‑16 while Chart 5.2 shows the composition of Total General Government Sector revenue over time.

Tasmania's most significant source of funding is Grants revenue (including GST and Australian Government Grants), which comprises 65.1 per cent of Total revenue in 2015‑16.

State Own‑Source Revenue accounts for 34.9 per cent of Total revenue. The largest source of State Own‑Source Revenue is Taxation, followed by Sales of Goods and Services. Major revenue risks and sensitivities are discussed in chapter 1 of this Budget Paper. The major variances in revenue compared to the 2014‑15 Budget are discussed in the Policy and Parameter Statement in chapter 4 of this Budget Paper.

Chart 5.1: Composition of Total Revenue, 2015‑16

Title: Chart 5.1: Composition of Total Revenue, 2015 16 - Description: Contains the composition of total revenue in 2015 16, showing a pie chart of the proportion and value of each revenue stream.
This chart shows the composition of Total Revenue, with 65.1% of revenue from Grants, followed by 19.4% from Taxation.

Chart 5.2: Composition of Total Revenue, 2004‑05 to 2018‑191

Title: Chart 5.2: Composition of Total Revenue, 2004 05 to 2018 19 - Description: Contains the composition of total revenue from 2004 05 to 2018 19, with the proportion by type  i.e. taxation, GST grant, Australian Government grant and other.
This chart shows that Total Revenue is projected to increase over the Budget and Forward Estimates with the greatest growth in GST Grants.

Notes:

1.   Data reflects actual outcomes for 2004‑05 to 2013‑14 and the original Budget estimates for 2014‑15.

2.   'Other' includes: Sales of Goods and Services; Fines and Regulatory Fees; Interest Income; Dividend, Tax and Rate Equivalent Income; Other Revenue; and Other Grants and Subsidies.

3.   'Other Australian Government Grants' include Specific Purpose Payments and National Partnership Payments.

 


Grants

Grants primarily reflect transfers of funding from the Australian Government and are estimated to be $3 453.3 million in 2015‑16. This is an increase of $425.8 million above the 2014‑15 Budget estimate of $3 027.5 million.

Table 5.2: Grants

 

2014-15
)

Budget

2015-16
)

Budget

2016-17
Forward

Estimate

2017-18
Forward

Estimate

2018-19
Forward

Estimate

 

$m)

$m)

$m)

$m)

$m)

General Purpose Payments (Untied Funding)

)

 

)

)

)

GST Revenue

1 911.4

2 246.1

2 362.1

2 423.4

2 521.3

 

 

 

 

 

 

Payments for Specific Purposes (Tied Funding)

 

 

 

 

 

Specific Purpose Payments1

 

 

 

 

 

To the State2

539.1

569.4

591.2

601.6

607.8

Through the State

199.9

226.2

243.1

256.1

263.5

 

739.1

795.5

834.3

857.7

871.4

National Partnership Payments1

 

 

 

 

 

To the State

181.2

231.9

151.8

90.2

144.8

Through the State

72.1

71.7

71.1

73.7

76.3

 

253.3

303.5

223.0

163.9

221.0

 

 

 

 

 

 

Total Payments for Specific Purposes

992.4

1 099.0

1 057.3

1 021.6

1 092.4

 

 

 

 

 

 

Other Grants and Subsidies

123.7

108.2

111.0

113.4

123.0

Total

3 027.5

3 453.3

3 530.4

3 558.4

3 736.7

 

 

 

 

 

 

Notes:

1.   Estimates of Specific Purpose Payments and some National Partnership Payments may differ from those published in the Australian Government's 2015‑16 Budget due to the need to finalise State estimates before the release of the Australian Government Budget.

2.   Includes National Health Reform and Students First education reforms funding.

 

In accordance with the Intergovernmental Agreement on Federal Financial Relations (IGA), transfers from the Australian Government fall into two categories:

       General Purpose Payments (GPPs), which are 'untied' payments that can be used at the State's discretion. The GST distribution is the only GPP received by Tasmania in 2015‑16; and

       conditional (tied) funding in the form of Payments for Specific Purposes, including National Partnership Payments, Specific Purpose Payments, National Health Reform funding and Students First education reforms funding. These payments must only be spent for purposes as agreed with the Australian Government.

GST Revenue

GST Revenue is the largest single source of revenue for Tasmania representing 42.3 per cent of Total General Government Sector revenue in 2015‑16.

In accordance with the Intergovernmental Agreement on Federal Financial Relations, all GST Revenue collected by the Australian Government is distributed amongst the states and territories. Each state's GST entitlement is dependent on three factors: national GST collections, the state's per capita relativity and the state's share of the national population.

The Commonwealth Grants Commission (CGC) makes recommendations to the Australian Government Treasurer regarding each jurisdiction's relativity. Further detail on the Commonwealth Grants Commission's methodology is provided in the Commonwealth-State Financial Relations section (Chapter 5) of the Guide to the Budget (available on the Treasury website).

Historically, Tasmania has been assessed by the CGC as having a lower than average fiscal capacity and requiring greater than its population share of GST. This reflects the relatively higher cost of service provision in the State and the below average capacity to raise revenue.

The CGC's 2015 Methodology Review of GST Revenue Sharing Relativities has been completed and this is discussed in the Federal Financial Relations section of this chapter. The new methodology will apply from 2015‑16.

For the 2015‑16 Budget, Treasury has adopted its own financial model updated to account for changes arising from the CGC Review. The model used the 2015‑16 per capita relativity recommended by the CGC and preliminary estimates of the national GST pool. The 2015‑16 Australian Government Budget, released on 12 May 2015, forecasts stronger growth in the GST pool and a decline in Tasmania's relativity over the Forward Estimates. The revenue impact from the declines in relativity is largely offset by the increase in the GST pool estimates. The Australian Government Budget estimates show a net variance from Treasury's estimates of negative $15 million over the four years from 2015‑16 to 2018‑19 (0.2 per cent of total GST revenue).

Notwithstanding the differences arising from the updated forecasts in the Australian Government Budget, the forecast of per capita relativities over the Forward Estimates period, estimated by Treasury's financial model, will also differ from the Australian Government Budget estimates as the Australian Government does not adjust for changes in jurisdictional fiscal capacities. The Australian Government acknowledges the limitations of its methodology in its 2015‑16 Budget and included a discussion on the impact on forecast relativities of changes in iron ore prices and volumes. The Australian Government Treasury is expected to consult with the states and territories on its methodology for preparing relativity projections in its future Budget updates.

Table 5.3 shows GST Revenue estimates for the national pool and Tasmania.


Table 5.3: Tasmanian GST Revenue Estimates

2015-16
)

Budget

2016-17
Forward

Estimate

2017-18
Forward

Estimate

2018-19
Forward

Estimate

)

)

)

)

National GST Collections ($m)1

57 320

60 620

63 820

67 300

Tasmania's GST Share (%)2

3.92

3.90

3.80

3.75

Tasmania's GST Revenue ($m)2

2 246.1

2 362.1

2 423.4

2 521.3

 

 

 

 

 

Notes:

1.   The national GST pool collections were preliminary estimates and differ from those released in the 2015‑16 Australian Government Budget.

2.   2015‑16 Budget is based on the actual relativity that will apply in 2015‑16 as recommended by the CGC.

 

GST payments to Tasmania are expected to be $2 246.1 million in 2015‑16. This growth in GST revenue to Tasmania reflects GST pool growth and an increase in Tasmania's GST relativity, partially offset by lower than average population growth.

Chart 5.3 below illustrates the difference between the 2014‑15 and 2015‑16 State Budget estimates of GST revenue to Tasmania over the Forward Estimates. The compound annual growth rate of GST revenue from 2015‑16 to 2018‑19 is 3.9 per cent.

Tasmania's share of the GST pool has grown from approximately 3.6 per cent in 2014-15 to 3.9 per cent in 2015‑16.

Chart 5.3: GST Revenue to Tasmania, 2007‑08 to 2018‑19

Title: Chart 5.3 GST Revenue to Tasmania, 2007 08 to 2018 19 - Description: Contains GST revenue to Tasmania 2007 08 to 2018 19, showing actual data from 2007 08 to 2013 2014, the 2014 15 Budget, and the 2015 16 Budget and Forward Estimates.
This chart illustrates the difference between the 2014-15 and 2015-16 State Budget estimates of GST revenue to Tasmania over the Forward Estimates, indicating that a higher level of GST revenue is budgeted for in the 2015-16 Budget than the 2014-15 Budget.

Note:

1.     The 2015‑16 Budget includes the estimated outcome for GST Revenue for 2014‑15.

 

Commonwealth Payments for Specific Purposes

Specific Purpose Payments and Reform Funding

In 2015‑16, Tasmania will receive an estimated $795.5 million in Specific Purpose Payments (SPPs) and reform agreement funding. This is an increase of $56.4 million above the $739.1 million estimated in the 2014‑15 Budget. The growth in SPPs and reform funding primarily reflects an increase in Education funding under the Students First education reforms.

SPPs are an ongoing funding arrangement from the Australian Government to the States for service delivery in a particular sector. There are currently three SPPs in operation: the National Skills and Workforce Development SPP; the National Disability Services SPP; and the National Affordable Housing SPP.

Reform funding arrangements, namely the National Health Reform Agreement and the Students First education reforms, replaced the former Health and Education SPPs as of July 2012 and January 2014 respectively.

National Partnership Payments

National Partnership Payments (NPPs) are provided to each State through National Partnership Agreements and Project Agreements. The agreements are usually time‑limited and aim to support the delivery of projects, facilitate reforms within the State or reward the State for delivering on national reforms.

In 2015‑16, Tasmania will receive an estimated $303.5 million of funding in NPPs, an increase of $50.2 million above the $253.3 million estimated for 2014‑15. This primarily reflects increases in funding under the Land Transport Infrastructure program for roads and the Water for the Future program.

Table 5.4 details the Payments for Specific Purposes that Tasmania will receive from the Australian Government in 2015‑16 and over the Forward Estimates period.


Table 5.4: Commonwealth Payments for Specific Purposes1

 

2014-15
)

Budget

2015-16
)

Budget

2016-17
Forward

Estimate

2017-18
Forward

Estimate

2018-19
Forward

Estimate

 

$m

$m

$m

$m

$m

Specific Purpose Payments

 

 

 

)

 

Education

 

 

 

)

 

Students First ‑ Government Schools2

147.3

165.1

178.4

180.1

177.3

Students First ‑ Non‑Government Schools2

199.9

226.2

243.1

256.1

263.5

National Skills and Workforce Development

31.2

31.2

31.4

31.4

31.4

Total Education Specific Purpose Payments

378.4

422.5

452.8

467.5

472.2

)

 

 

 

 

 

Health and Human Services

 

 

 

 

 

National Health Reform3

315.7

327.9

336.3

344.8

353.6

National Disability Services

16.6

16.7

16.7

16.8

16.8

National Affordable Housing

28.4

28.4

28.5

28.6

28.8

Total Health and Human Services Specific Purpose Payments

360.6

373.0

381.5

390.2

399.1

 

 

 

 

 

 

Total Specific Purpose Payments

739.1

795.5

834.3

857.7

871.4

 

 

 

 

 

 

National Partnership Payments

 

 

 

 

 

Education

 

 

 

 

 

Early Childhood Education4

5.2

8.8

....

....

....

National School Chaplaincy Program

....

2.1

2.1

2.1

....

Trade Training Centres in Schools

1.8

....

....

....

....

Supporting Students with Disabilities

1.2

....

....

....

....

Independent Public Schools

0.6

0.6

0.6

....

....

Total Education National Partnerships

8.8

11.5

2.7

2.1

....

 


Table 5.4: Commonwealth Payments for Specific Purposes (continued)

 

2014-15
)

Budget

2015-16
)

Budget

2016-17
Forward

Estimate

2017-18
Forward

Estimate

2018-19
Forward

Estimate

$m

$m

$m

$m

$m

Healthcare

Health and Hospitals Fund

Royal Hobart Hospital Redevelopment

....

....

....

....

50.0

National Cancer System

6.8

9.0

....

....

....

LGH Acute Medical and Surgical5

1.0

....

....

....

....

Improving Health Services in Tasmania

Reducing Elective Surgery Lists

7.1

10.9

....

....

....

Innovative Flexible Funding for Mental Health

1.0

1.0

....

....

....

Improving Patient Pathways through Clinical and System Redesign

5.1

5.1

....

....

....

Enhancing Subacute Care  Better Access to Community Based Palliative Care Services

1.7

1.7

....

....

....

Essential Vaccines

5.0

4.6

3.8

0.1

....

Commonwealth Dental Health Program

4.3

....

....

....

....

Supporting National Mental Health Reform

1.6

1.7

....

....

....

Expansion of BreastScreen Australia Program

....

0.4

0.4

....

....

Other6

0.7

0.5

....

....

....

Total Healthcare National Partnerships

34.3

34.9

4.3

0.1

50.0

Community Services (including Disability)

 

)

 

 

 

Transitioning Responsibilities for Aged Care and Disability Services

27.0

14.8

15.8

16.8

17.9

Pay Equity for the Social and Community Services Sector

3.2

2.7

3.6

4.5

....

DisabilityCare Australia Fund Payments

....

2.0

4.1

4.2

4.4

Assist Preparation Towards Launch of the NDIS5

0.6

0.6

....

....

 

Total Community Services (including Disability) National Partnerships

30.8

20.1

23.4

25.5

22.2

 

 

 

 

 

 

Infrastructure

Land Transport Infrastructure Projects Road

66.8

108.1

83.1

38.5

48.5

Land Transport Infrastructure Projects Rail

22.5

15.0

15.0

15.0

15.0

Black Spot Project

....

4.3

4.3

1.6

1.6

Land Transport Infrastructure Projects - Heavy Vehicle Safety

....

0.9

0.9

0.9

0.9

Other

0.4

0.1

0.1

0.1

0.1

Total Infrastructure National Partnerships

89.7

128.2

103.3

56.0

66.0


Table 5.4: Commonwealth Payments for Specific Purposes (continued)

2014-15
)

Budget

2015-16
)

Budget

2016-17
Forward

Estimate

2017-18
Forward

Estimate

2018-19
Forward

Estimate

$m

$m

$m

$m

$m

Skills and Workforce Development

Australia's Future Workforce - National Partnership on Skills reform

8.4

8.4

11.6

....

....

Other

0.3

0.3

....

....

....

Total Skills and Workforce Development National Partnerships

8.7

8.7

11.6

....

....

)

Environment

Water for the Future

Sustainable Rural Water Use and Infrastructure

0.4

20.6

....

....

....

Caring for Our Country

0.2

....

....

....

....

Total Environment National Partnerships

0.6

20.6

....

....

....


 

 

 

 

 

 


Other Services

 

 

 

 

 

Financial Assistance Grants to Local Government

72.1

71.7

71.1

73.7

76.3

Legal Aid

6.1

6.2

6.3

6.4

6.5

Disaster Resilience5

2.0

1.3

....

....

....

Provision of Fire Services5

0.3

0.3

0.3

....

....

Total Other Services National Partnerships

80.4

79.4

77.7

80.1

82.8

 

 

 

 

 

 

Total National Partnership Payments

253.3

303.5

223.0

163.9

221.0

 

 

 

 

 

 

TOTAL PAYMENTS FOR SPECIFIC PURPOSES

992.4

1 099.0

1 057.3

1 021.6

1 092.4

 

 

 

 

 

 

Total to the State

720.3

801.2

743.1

691.8

752.6

Total through the State

272.1

297.8

314.2

329.7

339.8

 

992.4

1 099.0

1 057.3

1 021.6

1 092.4

 

 

 

 

 

 

Notes:

1.   Estimates of Specific Purpose Payments and some National Partnership Payments may differ from those published in the Australian Government's 2015‑16 Budget due to the need to finalise State estimates before the release of the Australian Government Budget.

2.   From 2018, the Australian Government funding growth for Students First education reform will reduce to CPI with an allowance for changes to enrolment numbers.

3.   From 2017‑18, the Australian Government funding growth for Public Hospital services will reduce to CPI plus population growth.

4.   Australian Government Funding for Universal Access to Early Childhood Education, from calendar year 2016, is subject to negotiation with the Australian Government.

5.   Presented as Other in the 2014-15 Budget.

6.   The value in 2016‑17 for Other is estimated to be $30 000. This amount does not appear in the Table due to rounding.


Federal Financial Relations

Revenue transfers from the Australian Government are a vital source of revenue for the states. In 2015‑16, it is estimated that Tasmania's total grants, which primarily reflect transfers from the Australian Government in the form of GST and payments for specific purposes, will equate to 65.1 per cent of Tasmania's total General Government Sector revenue.

States' dependence on grant funding is primarily the result of the fundamental imbalance between the revenue raising powers and expenditure responsibilities of each level of government, known as Vertical Fiscal Imbalance (VFI). A detailed description of VFI, and other characteristics of financial relations in the Australian Federation, including the principle of Horizontal Fiscal Equalisation (HFE), can be found in the Commonwealth‑State Financial Relations section of the Guide to the Budget.

The current challenges that Tasmania faces within the Federal Financial Relations environment are outlined below.

White Papers on the Reform of the Federation and Taxation

The Australian Government has committed to producing White Papers on the Reform of the Federation and the Reform of Australia's Taxation System for release in the lead up to the next Federal election.

The Federation White Paper will consider reform to Commonwealth‑State roles and responsibilities, VFI and HFE. It aims to clarify roles and responsibilities between all levels of Government to ensure that, as far as possible, each level of Government is sovereign in its own sphere.

Issues papers have been released for the five areas of the Federation White Paper (A Federation for Our Future, Health, Education, Housing and Homelessness, and Federal Financial Relations). The Federation Green Paper is expected to be publicly released in the second half of 2015.

A Discussion Paper on Taxation was released in March 2015. The Discussion Paper focussed on how an efficient and fair tax system should be structured. Work has also commenced on potential reform options to be covered in the Taxation Green Paper, which is expected to be released in the second half of 2015.

Australia's substantial VFI and long‑term fiscal pressures for all levels of government mean that the Federation White Paper will be closely linked to reforms considered in the Taxation White Paper and will necessitate close interaction between the two processes. Tasmania supports a coordinated approach to considering national and state taxation reform, recognising that there are inherent difficulties that inhibit individual states from achieving significant reform independently or without the support of the Australian Government.

Tasmania strongly supports retaining the principles of HFE. HFE is a cornerstone of the success of Australian society. It has served Australia well by responding and adapting to changing state circumstances, and allowing for the mobility of labour and capital across the national economy. Without HFE, certain states within the Federation, including Tasmania, would be significantly disadvantaged due to unavoidable differences in fiscal capacities and the cost of providing government services, given factors such as the composition of the State's population.


Due to these factors, Tasmania is a major beneficiary of the HFE process. In 2015‑16, Tasmania will receive approximately 1.8 times its population share in GST, which is $1 012 million above its population share. Tasmania will be materially disadvantaged by any softening of the principle of HFE and will continue to argue strongly that the current system has served the nation well. It is important to note that the majority of the GST pool is distributed on a per capita basis, with around 12 per cent of the pool used for equalisation purposes in 2015‑16.

Tasmania will continue to actively participate in the future development of the two White Papers.

Commonwealth Grants Commission 2015 Methodology Review

The Commonwealth Grants Commission's Report on Goods and Services Tax (GST) Revenue Sharing Relativities ‑ 2015 Methodology Review and its supplementary advice on possible approaches to mitigate the effects of revenue volatility, were publicly released on 9 April 2015.

The 2015 Final Report provides recommendations to the Australian Government Treasurer on the revenue sharing relativities to be used to distribute GST revenue between the states and territories in 2015‑16. It also recommends adjustments to the underlying assessment methodology, which will subsequently be used to determine the relativities from 2015‑16 until the next methodology review.

The supplementary advice, requested by the Australian Government in the context of declining mineral royalty revenues in Western Australia, provided the Commission's views on possible approaches to mitigate the effects of revenue volatility. The advice did not contain any recommendations or provide alternative approaches, with the Commission stating:

"We have considered how the current system could be modified to both achieve HFE and have a GST distribution in the application year which more closely reflects the fiscal capacities of States in that year. We could not identify a modification which would operate with reliability over a span of years. While we can appreciate the budgetary pressures facing Western Australia, we do not consider that the HFE system is designed, or can reliably be redesigned, to provide partial responses to year to year budgetary problems and also achieve the objective of HFE."

However, the Commission's advice did provide illustrative examples on how the Australian Government could increase the GST share for any state and offset this against other states. This was presented as three sets of relativities that would effectively move specific dollar amounts ($100 million, $300 million or $500 million) to Western Australia.

The merit of mitigating the effects of volatile revenues through the GST distribution system was discussed at length at the Council for Federal Financial Relations meeting in April 2015. Except for Western Australia, all states and territories supported the Australian Government adopting the Commission's independent recommendations for 2015‑16 and were strongly opposed to any 'one-off' changes to address the issue of Western Australia's declining mining royalties through the GST distribution system. The issue was also discussed at the Council of Australian Governments (COAG) meeting in April.

The Australian Government accepted the Commission's recommended GST revenue sharing relativities in its 2015‑16 Budget.

Throughout the Review and subsequent debates, Tasmania argued that HFE is a fundamental characteristic of the success of Australia's Federation, and that using the GST distribution to address an issue for a specific state would materially undermine the fabric of the HFE system. Tasmania will continue to argue the merits of the principle of HFE throughout the White Paper on the Reform of the Federation process.

National Disability Insurance Scheme

The previous Tasmanian and Australian Governments signed the Heads of Agreement on the National Disability Insurance Scheme (NDIS) (full scheme) in May 2013. The Heads of Agreement covers the transition years to the full Scheme in 2019-20. Tasmania's participation in the NDIS is fully funded in accordance with the Heads of Agreement.

The Heads of Agreement provides that the transition profile of clients coming into the Scheme between 2016 and 2019 will be agreed by September 2015 and that, from 2017, the risk sharing arrangements between the State and the Australian Government will be re‑negotiated. To the extent that the outcomes differ from Tasmania's current estimates, these negotiations may have a material impact on the timing and size of Tasmania's financial contribution. It is expected that the future funding will be mutually agreed within the timeframes specified in the Heads of Agreement.

State Taxation

In 2015‑16, State Taxation revenue is forecast to be $43.9 million higher than the 2014‑15 Budget, primarily due to increases in Conveyance Duty ($24.7 million), Land Tax ($5.4 million) and Payroll Tax ($4.8 million).

State Taxation revenue is forecast to grow by $53 million (compound annual growth rate of 1.7 per cent) from 2015‑16 to 2018‑19. The low growth rate is mainly the result of lower Guarantee Fees across the period and a reduction in Motor Tax and Insurance Duty receipts from 2016‑17 due to the reinstatement of pre 1 October 2012 levels (adjusted for inflation) for Motor Tax on light vehicles and duty on Motor Accident Insurance Board premiums being phased in from 1 July 2017.

The Government has not introduced any new taxes or increased the rate of any existing taxes in the Budget or over the Forward Estimates period.

Table 5.5 provides details of the components of the State Taxation estimates.

Definitions of the State taxes, including relevant legislation, can be found in the Glossary section of the Guide to the Budget.


Table 5.5: State Taxation

 

2014-15)
)

Budget)

2015-16)
)

Budget)

2016-17)
Forward)

Estimate)

2017-18)
Forward)

Estimate)

2018-19)
Forward)

Estimate)

 

$m)

$m)

$m)

$m)

$m)

 

 

 

 

 

 

Payroll Tax

316.7)

321.5)

334.5)

347.8)

361.6)

 

 

 

 

 

 

Taxes on Property

 

 

 

 

 

Land Tax

88.6)

94.0)

96.9)

99.8)

102.7)

Fire Service Levies1

54.8)

57.1)

58.8)

60.6)

62.5)

Guarantee Fees2

24.9)

23.2)

20.5)

16.8)

16.7)

Conveyance Duty3

155.9)

180.5)

171.8)

175.9)

180.1)

 

324.2)

354.8)

347.9)

353.1)

362.0)

Taxes on Provision of Goods and Services

 

 

 

 

 

Gambling Taxes

 

 

 

 

 

Casino Tax and Licence Fees

55.5)

56.1)

56.7)

57.4)

58.0)

Betting Exchange Taxes and Levies

3.4)

3.5)

3.5)

3.6)

3.7)

Lottery Tax

29.7)

29.3)

29.8)

30.4)

31.1)

Totalizator Wagering Levy4

7.0)

7.1)

7.3)

7.5)

7.7)

Insurance Duty5

83.0)

85.8)

88.8)

87.3)

85.9)

 

178.6)

181.9)

186.2)

186.2)

186.4)

Taxes on the Use of Goods and Services

 

 

 

 

 

Vehicle Registration Fees

36.4)

38.2)

39.4)

40.7)

42.0)

Motor Vehicle Fees and Taxes

 

 

 

 

 

Motor Vehicle Duty

39.1)

39.5)

39.5)

39.5)

39.5)

Motor Tax6

80.7)

83.6)

86.6)

83.7)

80.5)

Motor Vehicle Fire Levy

7.4)

7.6)

7.6)

8.1)

8.1)

 

163.7)

169.0)

173.1)

172.0)

170.1)

 

 

 

 

 

 

TOTAL STATE TAXATION

983.2)

1 027.1)

1 041.7)

1 059.1)

1 080.1)

 

 

 

 

 

 

Notes:

1.   Fire Services Levies are reported as a tax for the purposes of the Uniform Presentation Framework, however, all revenues go directly to the State Fire Commission.

2.   Guarantee Fees reduce across all years which is largely driven by the outcomes of the Capital Structure Review of the State‑owned electricity businesses together with changes to Tasmanian Networks Pty Ltd's Guarantee Fee assumptions, particularly relating to a portion of long‑term debt that will be refinanced in 2017.

3.   The 2016‑17 Conveyance Duty forecast is less than 2015‑16 due to an increased provision for duties for corporate reconstructions in 2015-16. Sundry Legal Documents Duty is included in Conveyance Duty. The Budget estimate of $40 000 for Sundry Legal Documents Duty in 2014-15 was presented separately in the 2014-15 Budget.

Other Gaming is included in Totalizator Wagering Levy. The Budget estimate of $32 000 for Other Gaming in 2014‑15 was presented separately in the 2014-15 Budget.

4.   Insurance Duty revenue in 2017‑18 reduces due to reinstatement of the pre 1 October 2012 (adjusted for inflation) levels for duty on Motor Accidents Insurance Board premiums phased in over two years.

5.   Motor Tax receipts reduce in 2017‑18 due to reinstatement of the pre 1 October 2012 (adjusted for inflation) levels of Motor Tax for light vehicles phased in over two years.

 


Chart 5.4 shows that the 2015‑16 Budget and Forward Estimates are consistent with the levels forecast in the 2014‑15 Budget.

 

Chart 5.4: State Taxation Revenue, 2007‑08 to 2018‑19

Title: Chart 5.4: State Taxation Revenue, 2007 08 to 2018 19 - Description: Contains state taxation revenue from 2007 08 to 2018 19, showing actual data from 2007 08 to 2013 2014, the 2014 15 Budget, and the 2015 16 Budget and Forward Estimates.
This chart shows that the 2015-16 Budget and Forward Estimates for State Taxation Revenue show continued growth over the period..

Note:

1.   The 2015‑16 Budget includes the estimated outcome for State Taxation Revenue for 2014‑15.

Tax Expenditure Statement

This statement provides an estimate of the revenue the Government has forgone, or the financial benefit obtained by taxpayers, through concessions, benefits and incentives the Government provides through the tax system. Tax expenditures have been estimated for the main revenue lines of payroll tax, land tax and conveyance duty.

Methodology

Tax exemptions, rebates and concessions are measured based on the revenue foregone approach, where the value of the revenue that would have been received if the standard rate of tax had been applied is estimated.

The methodology does not allow for any behavioural changes that may result if an exemption, rebate or concession was removed. The approach also does not allow for potential tax rate changes that may result if a tax exemption, rebate or concession were removed.

Where thresholds are removed, the resulting measure of expenditure is labelled a tax free threshold in the table below. The tax expenditure, or revenue foregone, associated with providing tax free thresholds has been calculated for payroll tax.

All other expenditure measures included in Table 5.6 are measured as deviations from the current tax settings.

 

Table 5.6: Estimated Major Tax Expenditures1

 

2014‑15

2015‑16

 

$m

$m

 

 

 

Payroll Tax2

 

 

Tax-free threshold

201.3

208.4

Educational institutions exemption

1.1

1.1

Health care service provider exemptions

1.1

1.1

Employer payroll tax rebate for additional positions created

3.5

4.3

 

207.0

214.9

Land Tax3

 

 

Principal place of residence exemption

100.4

102.2

Primary production land exemption

75.9

77.2

Religious bodies, charitable institutions, or educational institutions exemption

5.7

5.8

Other

4.9

5.1

 

187.0

190.3

Conveyance Duty4

 

 

Ex gratia relief provided for corporate reconstructions

0.6

20.6

Family farm transfers

1.7

1.7

Transfer of public road or park/garden to council

2.6

2.6

Relationship breakdown or spouse and significant relationship transfers

10.8

10.8

Other

1.1

1.1

 

16.7

36.8

 

 

 

TOTAL

410.6

442.0

 

 

 

Notes:

1.   The estimates in this table are based on data available at the publication of the 2015-16 Budget.

2.   The Payroll Tax base is all wages paid in Tasmania. Estimates are based on the expected growth in payroll tax revenue.

3.   The Land Tax base is all freehold land in Tasmania in 2014‑15. Estimates are based on the expected growth in Land Tax revenue. Land classified as principal place of residence (PPR) and primary production land (PPL) is charged a nil rate of Land Tax.

4.   The Conveyance Duty tax base is the concessional or exempt properties transferred in 2013‑14. Estimates are based on the expected growth in conveyance duty revenue. Not all exempt transactions are recorded and not all valuation data is available, therefore the estimates are likely understated.


Other Revenue Sources

Sales of Goods and Services

Revenue from the Sales of Goods and Services is estimated to be $357.8 million in 2015‑16, an increase of $3.7 million above the 2014‑15 Budget of $354.1 million.

Table 5.7 details the major components of revenue from the Sales of Goods and Services.

Table 5.7: Sales of Goods and Services1

 

2014-15
)

Budget

2015-16
)

Budget

2016-17
Forward

Estimate

2017-18
Forward

Estimate

2018-19
Forward

Estimate

 

$m

$m

$m

$m

$m

 

 

 

 

 

 

Departmental Fees and Recoveries

 

 

 

 

 

Education2

61.1

38.7

38.9

39.9

39.4

Finance‑General

0.1

0.1

0.1

0.1

0.1

Health and Human Services3

82.0

77.5

76.6

77.8

79.1

Justice

3.9

3.1

3.2

3.2

3.3

Marine and Safety Tasmania4

5.8

4.9

4.2

6.0

5.1

Police and Emergency Management

2.6

2.1

2.1

2.1

2.1

Premier and Cabinet

11.0

9.9

10.1

10.2

12.2

Primary Industries, Parks, Water and Environment

34.5

37.1

37.6

38.0

38.5

State Fire Commission

5.8

5.9

6.0

6.2

6.3

State Growth

8.2

7.0

7.1

7.2

7.3

Tasmanian Audit Office

5.0

5.3

5.3

5.4

5.4

Tasmanian Health Service5

123.3

138.5

135.3

137.1

138.8

TasTAFE2

7.5

25.9

26.7

27.5

28.3

Tourism Tasmania

0.6

0.6

0.6

0.6

0.6

 

351.4

356.4

353.7

361.3

366.5

 

 

 

 

 

 

Other Sales of Goods and Services

2.7

1.3

1.3

1.4

1.4

TOTAL SALES OF GOODS AND SERVICES

354.1

357.8

355.1

362.7

367.9

 

 

 

 

 

 

Notes:

1.   The information provided in this section may differ from the Sales of Goods and Services for each agency in Government Services Budget Paper No 2 due to the elimination of inter‑agency transactions during the consolidation process.

2.   The movement in Education and TasTAFE in 2015‑16 reflects a change in the recognition of revenue between these two organisations.

3.   The decrease from 2014‑15 to 2015‑16 primarily reflects the finalisation of receipts from the Australian Government for the Tasmania eHealth project.

4.   The decrease in Marine and Safety Tasmania in 2015‑16, 2016‑17 and 2018‑19 reflects the timing of recreational boating licence renewals, which occur every three years.

5.   The increase in the Tasmanian Health Service (formerly the three Tasmanian Health Organisations) reflects updates to revenue estimates to align with the most recent funding agreements with non-government organisations and updates to own source revenue.

Fines and Regulatory Fees

Revenue from Fines and Regulatory Fees is estimated to be $96.1 million in 2015‑16, a decrease of $7.2 million below the 2014‑15 Budget of $103.3 million. Table 5.8 details the major components of Fines and Regulatory Fees.

Table 5.8: Fines and Regulatory Fees1

 

2014-15)
)

Budget)

2015-16)
)

Budget)

2016-17)
Forward)

Estimate)

2017-18)
Forward)

Estimate)

2018-19)
Forward)

Estimate)

 

$m)

$m)

$m)

$m)

$m)

 

 

 

 

 

 

Fines

 

 

 

 

 

Commitment to Increase Fines Revenue2

1.5)

3.0)

3.0)

3.0)

3.0)

Making Criminals Pay3

....)

0.8)

0.8)

0.8)

0.8)

Other Fines4

20.2)

20.3)

20.8)

20.7)

20.3)

 

21.7)

24.0)

24.5)

24.4)

24.0)

 

 

 

 

 

 

Fees

 

 

 

 

 

Abalone Licences

4.6)

4.7)

4.7)

4.7)

4.8)

Water Licence Fees

1.9)

1.9)

1.9)

2.0)

2.0)

Environment Fees

4.5)

4.6)

4.7)

4.8)

5.0)

Certificate of Competency Fees

0.2)

....)

....)

....)

....)

Drivers Licences5

8.7)

7.0)

7.2)

7.3)

7.4)

Photo Licence Fees

1.5)

1.7)

1.7)

1.8)

1.8)

Vehicle Inspection Services Fees6

....)

....)

....)

....)

....)

Quarantine Fees

1.8)

1.8)

1.8)

1.9)

1.9)

Consumer Affairs Office Regulatory Fees

0.2)

0.2)

0.2)

0.2)

0.2)

Magisterial Courts Regulatory Fees

1.2)

1.2)

1.2)

1.2)

1.2)

Registrar-General Regulatory Fees

1.9)

1.9)

1.9)

1.9)

1.9)

Supreme Court Regulatory Fees

0.8)

0.8)

0.8)

0.8)

0.8)

Other Regulatory Fees7

54.3)

46.3)

47.0)

40.7)

35.5)

 

81.7)

72.1)

73.2)

67.3)

62.6)

 

 

 

 

 

 

TOTAL FINES AND REGULATORY FEES

103.3)

96.1)

97.8)

91.7)

86.6)

 

 

 

 

 

 

Notes:

1.   The information provided in this section may differ from the Fines and Regulatory Fees for each agency in Government Services Budget Paper No 2 due to the elimination of inter‑agency transactions during the consolidation process.

2.   This reflects the impact of the Government's election commitment to increase the levels of fines.

3.   This increase in revenue of $750 000 from 2015‑16 reflects the Government's election commitment to impose an extra fee on those convicted in either the Magistrates Court or Supreme Court of a criminal offence. Convictions in the Magistrates Court will attract a $50 fee and convictions in the Supreme Court will attract a fee of $150.

4.   Other Fines is primarily comprised of fines collected by Department of Justice, Inland Fisheries Service and Department of Police and Emergency Management.

5.   The movement in Driver Licences Fees primarily reflects the five year licence renewal cycle and the revised estimates for the number of learner drivers progressing to the Provisional Licence level.

6.   Vehicle Inspection Services Fees are estimated to be $45 000 in the 2015‑16 Budget, increasing to $48 000 in 2018‑19. This amount does not appear in the Table due to rounding.

7.   Other Regulatory Fees includes: the Tasmanian Economic Regulator; the Community Support Levy; and various other fees collected by agencies, such as recreational fishing licence fees. The reduction in Other Regulatory Fees in 2015‑16 and the Forward Estimates period reflects the decision to reclassify the revenue generated by the Asbestos Compensation Fund to Other Revenue to better align with audited financial statements.

Interest Income

Interest Income is estimated to be $16.7 million in 2015‑16, an increase of $0.8 million compared to the 2014‑15 Budget estimate of $15.9 million. The increase reflects an increase in the anticipated level of cash held during the year.

Dividend, Tax and Rate Equivalent Income

Dividend, Tax and Rate Equivalent Income is estimated to be $213.4 million in 2015‑16, a decrease of $129.5 million compared to the 2014‑15 Budget estimate of $342.9 million.

This has largely been driven by the decision by the Motor Accidents Insurance Board to remit a Special Dividend in 2014‑15, together with a reduction in ordinary Dividends from Hydro Tasmania from 2015‑16, driven by lower wholesale electricity prices reflecting the removal of carbon pricing and the softening of demand in the National Electricity Market.

This level of variability is not uncommon with returns from the Government businesses generally subject to some volatility, as shown in Chart 5.5.

Chart 5.5: Dividend, Tax and Rate Equivalent Income, 2008‑09 to 2018‑191

Title: Chart 5.5: Dividend, Tax and Rate Equivalent Income, 2008 09 to 2018 19 - Description: Contains dividend, tax and rate equivalent income from 2008-09 to 2018 19, showing actual data from 2007 08 to 2013 2014, the 2014 15 Budget, and the 2015 16 Budget and Forward Estimates.
This chart shows increasing returns from Government businesses and that variability is not uncommon with returns from the Government businesses, which are generally subject to some volatility.

Note:

1.   Data reflects actual outcomes for 2008‑09 to 2013‑14 and the original Budget estimates for 2014‑15.

 

Despite the reduction in 2015‑16, returns have increased when compared to the estimates presented in the 2014‑15 Budget Papers. This primarily reflects improved returns from Aurora Energy Pty Ltd and the Motor Accidents Insurance Board.

Table 5.9: Dividend, Tax and Rates Equivalent Income1

 

2014-15)
)

Budget)

2015-16)
)

Budget)

2016-17)
Forward)

Estimate)

2017-18)
Forward)

Estimate)

2018-19)
Forward)

Estimate)

 

$m)

$m)

$m)

$m)

$m)

 

 

 

 

 

 

Dividends

 

 

 

 

 

Aurora Energy Pty Ltd2

....)

20.1)

18.5)

17.7)

15.2)

Hydro Tasmania3

126.1)

13.6)

6.4)

26.7)

27.9)

Motor Accidents Insurance Board4

43.0)

43.8)

41.9)

41.6)

30.8)

Tasmanian Networks Pty Ltd5

....)

60.3)

58.2)

73.8)

59.4)

Tasmanian Ports Corporation6

....)

....)

....)

5.1)

10.4)

Tasmanian Public Finance Corporation7

10.2)

1.6)

1.4)

2.0)

2.3)

The Public Trustee

....)

0.1)

0.1)

....)

0.1)

 

179.2)

139.5)

126.5)

167.1)

146.1)

 

 

 

 

 

 

Special Dividends

 

 

 

 

 

Motor Accidents Insurance Board8

100.0)

....)

....)

....

....

 

100.0)

....)

....

....

....

Table 5.9: Dividend, Tax and Rates Equivalent Income1 (continued)

 

2014-15)
)

Budget)

2015-16)
)

Budget)

2016-17)
Forward)

Estimate)

2017-18)
Forward)

Estimate)

2018-19)
Forward)

Estimate)

 

$m)

$m)

$m)

$m)

$m)

 

 

 

 

 

 

Taxation Equivalents

 

 

 

 

 

Aurora Energy Pty Ltd2

3.3)

8.8)

8.4)

7.3)

6.3)

Forestry Tasmania9

(5.2)

....)

....)

....)

....)

Hydro Tasmania3

7.0)

2.9)

12.6)

13.2)

23.9)

Metro Tasmania Pty Ltd

....

0.4)

0.7)

0.7)

0.6)

Motor Accidents Insurance Board

1.3)

1.2)

0.7)

0.4)

0.1)

Tasmanian Networks Pty Ltd5

50.2)

56.7)

55.9)

50.0)

47.5)

Tasmanian Ports Corporation Pty Ltd6

(2.2)

....)

2.7)

5.2)

6.5)

Tasmanian Public Finance Corporation

1.7)

3.6)

3.0)

2.7)

2.7)

The Public Trustee

0.1)

....

....

0.1)

0.1)

TT-Line Company Pty Ltd10

3.6)

(3.8)

4.0)

4.4)

3.6)

 

59.7)

69.8)

88.0)

84.1)

91.3)

 

 

 

 

 

 

Rates Equivalents

 

 

 

 

 

Hydro Tasmania

4.0)

4.1)

4.2)

4.3)

4.4)

 

4.0)

4.1)

4.2)

4.3)

4.4)

 

 

 

 

 

 

TOTAL DIVIDEND, TAX AND RATE EQUIVALENT INCOME

342.9)

213.4)

218.7)

255.4)

241.8)

 

 

 

 

 

 

Notes:

1.   All Dividend, Tax and Rates Equivalent Income is reported on an accrual basis for all years.

2.   The nil Dividend payable by Aurora Energy Pty Ltd in 2014‑15 reflects that the Dividend payable in respect of profits earned in 2013‑14 was accrued and reported by Aurora Energy Pty Ltd in 2013‑14. Aurora Energy Pty Ltd's Dividends and Income Tax Equivalents over the Budget and Forward Estimates reflect revised assumptions of customer retention and churn over the period relative to the 2014‑15 Budget.

3.   Hydro Tasmania's returns over the period are expected to be more consistent across the Budget and Forward Estimates, but at a lower overall level in 2017‑18 than estimated in the 2014‑15 Budget. This reflects the progressive implementation of the Government's revised strategy for the business, including the outcomes of the capital structure review.

4.   The decrease in Dividends from the Motor Accidents Insurance Board in 2018‑19 reflects the significant profits generated in the 2012‑13 financial year no longer being included in its five‑year rolling average dividend calculation.

5.   Tasmanian Networks Pty Ltd commenced operations on 1 July 2014 taking over the network operations of Aurora Energy Pty Ltd and Transend Networks Pty Ltd. The movement in Dividends and Income Tax Equivalents from Tasmanian Networks Pty Ltd across the Forward Estimates reflect revised financial forecasts given greater certainty in the Company's operations since its establishment, the outcomes of the capital structure review of the State owned electricity businesses, the staged implementation in Tasmanian Networks Pty Ltd of the revised Dividend policy and the forecast outcome of the Australian Energy Regulator's Distribution Revenue Reset that will take effect from 1 July 2017.

6.   The Tasmanian Ports Corporation Pty Ltd has revised its forecast Dividends and Income Tax Equivalents due to increased freight volumes driving increased profit forecasts from 2016‑17.

7.   An additional discretionary Dividend of $10.0 million was paid in 2014‑15, in accordance with Tascorp's Dividend policy.

8.   The Motor Accidents Insurance Board elected to pay a Special Dividend in 2014‑15.

9.   Forestry Tasmania is forecasting nil Income Tax Equivalents from 2015‑16 to 2018‑19, reflecting a change in its policy regarding the recognition of future tax benefits relating to forecast losses.

10. The reduction in Income Tax Equivalents from TT‑Line Company Pty Ltd in 2015‑16 reflects an expected once‑off negative impact of vessel revaluation calculations in that year, as well as the impact of annual exchange rate movements, which affect the vessel valuations.

Other Revenue

Other Revenue is anticipated to be $143.4 million in 2015‑16, an increase of $6.6 million above the 2014‑15 Budget estimate of $136.8 million.

Table 5.10 lists the sources of Other Revenue.

Table 5.10: Other Revenue1

2014-15
)

Budget

2015-16
)

Budget

2016-17
Forward

Estimate

2017-18
Forward

Estimate

2018-19
Forward

Estimate

$m

$m

$m

$m

$m

Mineral Royalties

26.7

28.0

28.7

29.4

30.2

Regional Water Authority Licence Fees

2.3

2.3

2.3

2.3

2.3

Other Revenue by Agency

Education2

23.4

18.3

18.6

20.2

19.5

Finance-General

3.4

3.6

3.6

3.6

3.6

Health and Human Services

18.9

18.8

19.3

18.9

19.2

Justice3

15.5

22.0

22.6

23.1

25.9

Police and Emergency Management

9.1

11.5

11.1

10.0

10.0

Premier and Cabinet

2.4

2.0

2.0

2.0

2.0

Primary Industries, Parks, Water and Environment

1.6

0.6

0.6

0.6

0.6

State Fire Commission

1.2

1.6

1.6

1.7

1.7

State Growth

2.7

2.7

2.0

2.0

2.0

Treasury and Finance

0.8

1.1

1.1

1.1

1.2

Tasmanian Health Service4

27.7

29.3

25.2

23.0

24.1

Other

1.2

1.5

1.7

1.7

1.7

TOTAL OTHER REVENUE

136.8

143.4

140.4

139.7

144.0

Notes:

1.   The information provided in this section may differ from Other Revenue estimates for each agency in Government Services Budget Paper No 2 due to the elimination of inter‑agency transactions during the consolidation process.

2.   The decrease in Education primarily relates to revised estimates for other revenue in schools based on 2013‑14 actual amounts.

3.   The increase in Justice primarily reflects the decision to reclassify the revenue generated by the Asbestos Compensation Fund from Other Regulatory Fees to Other Revenue to better align with audited financial statements.

4.   The increase in Tasmanian Health Service in 2015‑16 reflects a more accurate estimate of salary and wages recoveries.